The European Commission on Wednesday recommended not imposing fines on Spain and Portugal for missing budget-deficit targets a year ago, underscoring the lack of appetite across the bloc to come down harshly on members that break fiscal rules at a time of economy instability in the region.
Advertisement
European Union finance ministers last week backed a Commission view that neither Spain nor Portugal had taken effective action to meet deficit reduction targets agreed with the European Union and that therefore the next step was to fine them 0.2 percent of GDP. If they do nothing, the zero fine will apply.
A more muted Mariano Rajoy, Spain’s acting prime minister, said he was “satisfied” by the decision.
Economic Commissioner Pierre Moscovici seemed to echo that view, tweeting on Wednesday: “Fines would not have corrected the past and would have been counterproductive at a time when people doubt in Europe”.
Deadline for taking effective action and reporting on it will be 15 October 2016 both for Spain and Portugal.
The issue is especially sensitive for France, which is widely expected to miss its promise to meet the EU’s budget deficit limit of 3.0 percent of GDP next year after repeatedly failing to do so.
Under EU rules, governments can not run budget deficits higher than 3 percent of gross domestic product, a legal safeguard to ensure that excessive government borrowing does not undermine the common euro currency.
Despite the case for fines, the Commission instead recommended that Portugal puts an end to its excessive deficit this year and that Spain does so by 2018.
Spain was asked by Brussels to lower the deficit to 4.2 percent of GDP in 2015, from 5.9 percent in 2014, but the country ended up with a 5.1 percent shortfall instead.
Commission president Jean-Claude Juncker was thought to favour a hard line against the pair to show it intends to uphold the rules and use the powers to set an example, but that was rejected today.
The decision now goes to eurozone ministers for approval and expectations are high that the member states will do so, perhaps with some modifications.
German Finance Minister Wolfgang Schaeuble has also proposed the Commission completely or partially suspend structural funds for projects in 2017 as a penalty. “We believe these paths are realistic and both countries will be able to succeed in reaching them”, Dombrovskis said.
Advertisement
But the Commission must agree on this step with the European Parliament – and that discussion will take place only after the summer recess, a European source told AFP.
